Major hotel refurbishment project

Facts

Client: Main contractor

Region: UK

Industry: Construction, hotel refurbishment

Issues

Fenwick Elliott assisted the main contractor over a three year period in connection with a £180 million refurbishment of a major hotel. The original contract sum was circa £75 million and the project faced a number of significant challenges with unforeseen conditions, significant specification changes and delays which gave rise to the substantially increased cost.

We worked closely with our client and the employer throughout a series of negotiations to finalise the main contract final account without the need for an expensive dispute resolution process.

Solutions

Under the main contract, issues arose regarding the delivery of design information, valuation of measured work, delay and disruption and extensions of time. Particular issues of note were liability for concurrent delay, delayed design information, asbestos removal and commissioning mechanical works, and the interface between existing and new plant.

We assisted our client to successfully resolve the main contract final account through a series of structured negotiation phases.

In conjunction with this, there were a number of subcontract adjudications and arbitrations concerning valuation of delay and disruption, loss and expense and the value of the measured work.

An interesting challenge we faced was the legal significance of signed daywork sheets. We successfully argued that a subcontractor’s daywork sheet that had been signed by the main contractor did not necessarily give the subcontractor an entitlement to be paid the amounts identified on that daywork sheet if subsequent evidence could show that the hours claimed on the daywork sheet had not been spent. In one particular case, the main contractor successfully argued that the subcontractor’s daywork records were not legitimate evidence of the hours spent by the subcontractor because security turnstile records at the site entrance demonstrated that particular individuals identified on a daywork sheet were not in fact present on the relevant days.

Benefits

Under the main contract, the obvious benefit of reaching and negotiating a conclusion to the final account was that:

The parties were able to focus their energies on delivering the project, rather than on arguing about it;

Good relations were maintained between main contractor and employer;

The potentially enormous cost of a final account dispute was avoided;

Adverse publicity on a high-profile London hotel project was avoided.

In relation to the subcontract disputes which were the subject of formal dispute resolution, we were able to resolve these subcontract final accounts in a cost-effective manner at levels which accorded with the main contractor’s valuations prior to commencement of a dispute resolution process. The key to the successful resolution of a number of subcontract disputes was detailed and accurate record keeping.

The success of this process under the main contract was greatly enhanced by excellent construction and commercial management by the main contractor and a highly collaborative “problem solving” approach between senior management and lawyers from both sides rather than a focus on recriminations.